MCA Notifies Revised Small Company Thresholds

The Ministry of Corporate Affairs (MCA) has revised the definition of small companies by increasing the thresholds for paid-up capital and turnover. The change has been introduced through an amendment to Rule 2(1)(t) of the Companies (Specification of definition details) Rules, 2014, and is effective from December 1, 2025.

A joint reading of Section 2(85) of the Companies Act, 2013 and Rule 2(1)(t) of the 2014 Rules now defines a small company as a company (other than a public company) whose:

• paid-up share capital does not exceed INR 10 crore; and
• turnover, as per the profit and loss account for the immediately preceding financial year, does not exceed INR 100 crore.

These limits represent the maximum thresholds permitted under the Act. The government cannot further increase them unless the Act itself is amended.

The proviso to Section 2(85) clarifies that the definition does not apply to:

• a holding company or a subsidiary company;
• a company registered under Section 8;
• a company or body corporate governed by any special Act.

Limits Prior to the Notification

The thresholds have been gradually increased over time. Prior to this notification, the limits (last revised in September 2022) were:

• paid-up share capital not exceeding INR 4 crore; and
• turnover, as per the profit and loss account for the immediately preceding financial year, not exceeding INR 40 crore.

Reduced Compliance Burden

The revised definition is expected to reduce compliance requirements, as more companies will now fall within the small company category. Among the key benefits are the ability to have the annual return signed by the company secretary or, where there is no company secretary, by a director. Companies also benefit from lower penalties and may prepare and file an abridged annual return. In addition, only two board meetings are required in a year, and small companies are exempt from preparing a cash flow statement as part of their financial statements.